Kodiak – The Board of Trustees met to review the fiscal year 2021 (FY21) investment performance of the Alaska Permanent Fund (Fund), strategic and background information from several of APFC’s investment partners and members of the Investment Advisory Group, as well as electing corporate officers and approving a budget proposal which will be brought forth for inclusion in the FY23 operating budget.
As published in the Fiscal Year 2021 Annual Report, the Fund grew from $65.3 billion at the end of FY20, closing the fiscal year 2021 with a historic high total value of $81.9 billion. Now supporting more than 73% of the State of Alaska’s unrestricted spending, the Permanent Fund transferred $3.1 billion through the statutory Percent of Market Value (POMV) draw to the State in FY21. This rules-based structure allowed for a 5.25% annual draw from the Fund (statutorily decreasing to 5% beginning in FY22).
Through prudent investment management and opportunistic positioning of the assets, the Fund grew at a record pace for the fiscal year, outperforming the Passive Benchmark by 129 basis points and the Performance Benchmark by 198 basis points. This performance demonstrated the value-added benefit of actively managing the assets of the Permanent Fund as well as the commitment and courage of our team of dedicated public servants who achieved these impressive returns despite volatility across global markets related to the ongoing pandemic.
According to Callan, APFC’s general consultant, APFC performance ranked in the top quartile relative to large public Funds over the past Fiscal Year, and over the 3 and 5 year horizons.
Marcus Frampton, APFC Chief Investment Officer, noted that the Fund’s performance in FY21 was “outstanding by almost any measure or perspective.” He expressed that though pleased with the performance and its implications for Alaskans, he recognized that “this performance was accomplished in an extraordinarily accommodating environment for the types of risk assets the Fund invests in. With stock valuations now near all-time record levels and real interest rates near all-time lows, the team is focused on how to deliver outstanding results and protect capital in future periods which may not be as strong for markets generally.”
The highest performing assets in the Fund in FY21 were in the Public Equities portfolio which saw an actual return of 46.92%, exceeding the target return by nearly 6%. The Private Equities and Special Opportunities portfolio also saw a 64.61% rate of return, which was a full 10.4% over the target rate.
At the Trustees Annual Meeting, which concluded today, the Board held a discussion on the proposed budget for FY23. Having built a budget from zero, APFC directors and managers reviewed their workflows to capitalize on potential efficiencies while developing a proposed operating budget to strategically strengthen the Corporation as it continues to grow in value and complexity. This proposal was approved by the Board and will now be sent to the Office of Management and Budget for the Governor’s review and consideration. The governor’s proposed budget for all public agencies, including APFC will be introduced by December 15th for consideration during the upcoming legislative session.
Following the approval of a Risk Appetite matrix earlier in FY21, the Board examined historical and forward-looking measures of risk for the total Fund and underlying assets, which included the findings of a stress test and a review of the Risk Tolerance Portfolio relative to a number of scenarios and extreme events.
Fixed Income products were the first assets held by the Permanent Fund when it was established 45 years ago. The diverse and robust Fixed Income portfolio continues to stand as a cornerstone of the Permanent Fund. A comprehensive overview of the Fixed Income portfolio was given, including an analysis of key elements of the portfolio’s allocations and performance. Additionally, a presentation was shared by Ninety One Investment Institute, an external Fixed Income Manager who led a discussion on emerging markets and macro themes that are expected to drive asset valuations over the next decade, as well as recommended strategies for long-term asset allocations.
An update was given on the Private Credit portfolio with an overview of the investments and the continued benefits to the overall portfolio. The Board also heard a presentation by Audax, an APFC partner, regarding private debt and private credit lending and strategies to invest in these assets.
John Skjervem, a member of the APFC Investment Advisory Group, gave the Board a general introduction on investment opportunities, the appeal and mechanics of digital assets including blockchains, digital coins, digital tokens, as well as the regulatory, environmental and security concerns related to them.
With a stark reminder that the stock market is not the economy, Callan in a presentation on Fund performance and a capital market overview, shared in-depth insights into the US and global economic recovery efforts related to the ongoing pandemic and inflationary action.
KPMG completed the financial audit for the Fiscal Year 2021 and presented their findings to the Board. There were no matters to report and action was taken by the Board to approve the audited financial statements.
The Board also reviewed the goals associated with the strategic communication plan and had an overview on the investment disclosure policy.
Per APFC’s Bylaws, an election of corporate officers was held as part of the Annual Meeting protocols. Trustee Richards was elected to Chair and Trustee Mahoney to Vice-Chair of the APFC Board. Assignments to the Governance and Audit Committees will be posted on our website at a later date.
Learn more about the Alaska Permanent Fund and the Alaska Permanent Fund Corporation’s strategies, investments, financial statements, and people in the 2021Annual Report that is now available and can be viewed online at annualreport.apfc.org.